Hike rates

Mortgage Breaking News: BoC set to hike rates 75bps as inflation expectations rise

The likelihood of the Bank of Canada joining the “75 basis point club” rose on Monday after the release of two Bank polls that showed rising inflation expectations.

The Bank of Canada’s Business Outlook Survey and its Canadian Consumer Expectations Survey, both released on Monday, show that consumers and businesses expect high inflation to persist longer than we didn’t think so before.

Among companies, the average expected wage increase has reached an all-time high. Nearly half of companies expect their wage increases to remain above pre-pandemic levels beyond the next 12 months.

Inflation expectations have also risen among consumers, along with worries about rising food, gas and rent prices, the BoC survey noted.

“Expectations for inflation one year ahead and two years ahead continued to rise in the second quarter of 2022 and reached a new high,” the Bank said, adding that Canadians believe prices are being driven higher by supply chain issues, the COVID pandemic and increased government spending.

“Today’s CSCE report highlights the urgency for the BoC to reduce inflation,” Noted senior economist at TD, Leslie Preston. “Canadians remain confident in the BoC’s ability to do so, however, long-term inflation expectations have risen, as have concerns that the BoC will struggle to bring inflation back to target. Therefore, the Q2 survey underscores the merits of a 75 basis point rate hike at the next rate setting date next week.

Teachers’ completes acquisition of HomeEquity Bank

More than nine months after the Ontario Teachers’ Pension Plan Board announced its intention to purchase HOMEQ Corporation, the parent company of HomeEquity Bank, the deal has finally closed.

Teachers’ is the largest single-professional pension plan in Canada with over $227 billion in assets. It now takes control of HomeEquity Bank, the country’s first bank offering reverse mortgage solutions with a portfolio of more than $5.7 billion.

HomeEquity Bank completed over $1 billion in reverse mortgages in 2021 alone, which is a 28% increase from 2020.

“We look forward to supporting the growth of HomeEquity Bank and believe in its incredible potential,” said Jeff Markusson, Senior Managing Director, Financial Services, Private Capital at Ontario Teachers’, in a statement. “They have impressive growth prospects, a compelling value proposition, a high quality management team and share our vision of improving the lives of Canadian retirees.”

Bond markets are currently pricing in an 84% chance of a 75 basis point rate hike at the July 13 Bank meeting.

Three-quarters of hopeful homeowners are worried about rising rates

The rapid rise in interest rates seen in recent months is worrying potential buyers, according to a new survey.

More than three-quarters (76%) of Canadians likely to buy a home in the next year say they worry that rising rates will affect the price of the home they can afford.

Meanwhile, a third of existing homeowners with a mortgage and 47% of renters say they don’t know what rising mortgage rates mean for them, according to Ipsos. survey Made for TD.

The survey found that many young Canadians have never had to deal with a cycle of rising interest rates, which may explain some of the current confusion surrounding the impact of rising interest rates. interest.

While a majority of respondents (74%) say they have a good understanding of the impact of rising interest rates on the affordability of homeownership, a quarter (26%) don’t. .

Here are some other findings from the survey:

  • 48% of respondents say they know how a home equity line of credit (HELOC) differs from a mortgage.
  • 67% say they know how interest rates affect their ability to afford a home or renew their mortgage.
  • 74% of homeowners with a mortgage say they know what happens if they sell their home before the end of the mortgage term.
  • 68% say they know the difference between variable rate and fixed rate mortgages.
  • 60% of new borrowers know how the mortgage pre-approval process works.